Correlation Between Empire State and Elastic NV

Can any of the company-specific risk be diversified away by investing in both Empire State and Elastic NV at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Empire State and Elastic NV into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Empire State Realty and Elastic NV, you can compare the effects of market volatilities on Empire State and Elastic NV and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Empire State with a short position of Elastic NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire State and Elastic NV.

Diversification Opportunities for Empire State and Elastic NV

0.2

Correlation Coefficient

Empire State  Elastic NV

Modest diversification

The 3 months correlation between Empire and Elastic is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Empire State Realty and Elastic NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elastic NV and Empire State is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Empire State Realty are associated (or correlated) with Elastic NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elastic NV has no effect on the direction of Empire State i.e., Empire State and Elastic NV go up and down completely randomly.

Pair Corralation between Empire State and Elastic NV

Given the investment horizon of 90 days Empire State is expected to generate 9.73 times less return on investment than Elastic NV. But when comparing it to its historical volatility, Empire State Realty is 1.95 times less risky than Elastic NV. It trades about 0.05 of its potential returns per unit of risk. Elastic NV is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  7,325  in Elastic NV on August 31, 2024 and sell it today you would earn a total of  3,688  from holding Elastic NV or generate 50.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Empire State Realty  vs.  Elastic NV

Empire State Realty

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empire State Realty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empire State is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Elastic NV

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Elastic NV are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Elastic NV exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire State and Elastic NV

The main advantage of trading using opposite Empire State and Elastic NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire State position performs unexpectedly, Elastic NV can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Elastic NV will offset losses from the drop in Elastic NV's long position.

The idea behind Empire State Realty and Elastic NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.